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Real estate

Real Estate Business Plan: An Ultimate Guide for Real Estate Developers in 2022

Written By Valerie Mhere Community Manager
Last Updated: 2022-05-02 •

As a real estate developer, you may not have the capital or resources to expand your development business. It's essential to have a real estate business plan to solve this. These plans make it possible to attract investors and secure the equipment and resources you need.

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QuickBooks confirms that businesses with proposals are twice as likely to secure funding and loans and grow. Not to mention, with a real estate business plan, your business can expand 30% faster than a business without one.

Whether you need a business proposal to skyrocket your business or start a project, these plans are pivotal for real estate developers. This guide dives into the core components of a real estate business plan, common mistakes to avoid, and templates for real estate business plans. 

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The Top 10 Elements of a Real Estate Business Proposal 

Throughout your experience as a developer, you may have submitted your fair share of real estate business plans. However, keep your knowledge updated to avoid rejected proposals or plans that lack substance. 

Here are the top 10 vital components of every real estate business proposal for developers.

1. Market Analysis

Your market analysis validates how well you know your market and the opportunities and risks. Be specific about this, and detail how you will benefit from this analysis. Perhaps you need a business proposal for a single development project. Here's an idea on how to write the market analysis. 

Incorrect: Due to the increase of families relocating to Alabama from Nevada, building multi-family homes in Alabama and condos in Nevada would be highly lucrative.

Correct: As of 2019, 25% of families in Nevada have relocated to Alabama. Reports confirm this is due to better education systems and lower cost of living. The current market in Nevada shows there are 30% more single people are looking for condos over the past two years.

These are a few tips for market analysis:

  • Use historical, present, and future data to find market trends.
  • Understand the people living in that area and what they want. 
  • Understand sellers in that area. The information you need is why they sell and how much they price their properties. 
  • Analyze the risks of the location you want to invest in and how this can potentially harm your project.

 

2. SWOT Analysis

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Reflect on your market analysis to develop an accurate SWOT analysis. Without this section, you can't convince investors you thoroughly analyzed the market and know your shortcomings. 

Besides the information this provides potential investors with, a SWOT analysis is crucial for you too. This analysis gives you a detailed outline of areas to leverage and where your project may need the added boost. 

As you progress, continue to update your SWOT analysis. New threats, opportunities, weaknesses, and strengths could prevail, and you want to stay ahead of them. 

 

3. Goals and Objectives

Remember, goals are what you set to achieve a long-term ambition. Objectives are the milestones to get to that long-term ambition. Include your goals and objectives so investors can understand what you want to accomplish.

You can use your SWOT analysis and market analysis to construct this section. For example, your market analysis shows there’s an opportunity to build multi-family homes in Alabama. Your SWOT analysis highlighted vacant land in a convenient location. 

In this instance, your goal is to develop multi-family homes on the vacant land. Your objectives could include:

  • Find out who owns the land, evaluate the land and potentially negotiate a deal.
  • Develop the construction plans and modify them to the land. 
  • Speak to the local community about the quality of life in that area. 
  • Have developed your first set of multi-family homes by the end of the year. 

 

4. Organisational Structure 

Your organisational structure is typically short but impactful in your real estate proposal. This section is where you get to show the team behind your development plans. You’ll also demonstrate how the chain of command works so investors can see a reliable workforce. 

These are some aspects to include:

  • The chain of command 
  • Real estate experience for each team member and any relevant accomplishments
  • A brief background on your company/initiative/team and why you chose to start this project
  • The legal structure of your business
  • The mission, vision, and value of your company

Statistics and data may not be required, but remain as detailed as possible. You have a chance to show the face and passion behind your project, so use it well. 

 

5. Execution Plan

Your execution plan includes your lead and acquisition tactics. These tactics describe how you plan to find and acquire real estate properties, land, etc. Many professionals look to real estate brokers and some experienced agents for assistance. 

Like every aspect of your real estate business proposal, be specific. Explain your areas of interest and why, how you plan to find the real estate/land, and obstacles to consider.

This plan also details how you plan to execute your development project. Specify each stage of your project and the related resources, risks, and schedule. Your execution plan is paramount, so ensure this section is consistent with the rest of your proposal. 

 

6. Timeline

A timeline is critical as your goals have to be measurable. Interested parties will want to see how long each stage of your project will take, and this will help give you an idea of how to set realistic goals.

When formulating a schedule for your real estate business plan, consider seasonal changes. For example, in some states, it may not be possible to construct a home in Winter or during the scorching heat of Summer. You may have to slow down or halt your project. 

Avoid making loads of promises within a short timeframe. You would be setting yourself up for disappointment. Start with small increments of time, and as your project progresses, use wider timeframes. 

 

7. Finance Strategy 

You need to specify the financial backing to your project and how much you forecast in return on investment. All potential investors need this information to determine how worthwhile your project is.

Having a set budget helps you maintain how much you spend too. The last thing you want to do is quickly use up all your funds and have to invest more out of pocket. If you’re not too savvy on the financial aspect of real estate development, speak to a broker to help you. 

These are features to include in this section:

  • The total of your upfront investment
  • The full of your business expenses
  • Your reinvestment plan
  • Once the project is complete, how much do you plan to earn every quarter

 

8. Marketing Strategy

Your marketing strategy also includes how you plan to grow your business. Have a clear and realistic marketing strategy from the get-go.

When we think of marketing real estate, there may not be many ideas that come to mind besides social media. However, the development of digital marketing has made it possible to market and grow your business in various ways. Not to mention, traditional marketing is also effective for real estate. 

You want to explicitly define your marketing strategies, using data to support your chosen methods. Having this evidence validates the potential efficacy of your marketing strategies. 

Digital Marketing for Real Estate:

  • Email marketing campaign
  • A professional and enticing website
  • Virtual tours
  • Pay-per-Click ads 

Traditional Marketing for Real Estate:

  • Business cards
  • Partner with local businesses
  • Host an event
  • Use real estate websites like Zillow for advertising 

 

9. Exit Strategy

Once you've completed your real estate development project, think about property management to maintain your real estate. Consider questions like these:

  • Who is going to assist the tenants?
  • When will I know when to sell my real estate?
  • How am I going to ensure the property is managed successfully? 
  • Should I consult with a property management company?
  • Do I have a network of reliable suppliers to fix maintenance issues swiftly?

You can use the best marketing techniques and invest large amounts of cash in your real estate project. Yet if you fail to develop an effective exit strategy, all your efforts would be moot. 

 

10. Executive Summary

This summary appears first in a real estate business proposal. But it’s best to write it last. Writing your executive summary as the last step allows you to combine all the key information from other sections into an executive summary. The purpose of your executive summary is to:

  • A brief overview of your business and its mission statement
  • Your goals and objectives
  • What motivated you to start this project
  • Additional information that makes your company or this project unique 

 

 

5 Reasons Why Your Business Plans Aren't Successful

 Developing a real estate project requires a leap of faith for both you and all the parties involved. There may have been a few or several times your real estate business plan was unsuccessful. Let’s explore the top 5 reasons for this. 

 

1. Your Business Idea Was Bad

There’s no kinder way to say this, but it could be true. A bad business idea usually stems from not genuinely understanding your market or being too opportunistic. Sometimes an idea seems likely on paper, but you need to know if it will be realistic in the real world. 

While there is no set of rules to avoid a bad business idea, you should evaluate and validate your ideas before creating proposals for them. Rely on detailed market analysis to support this. If you’re uncertain about an idea, gather more data before developing a proposal. 

 

2. There Was No Exit Strategy

When you write a real estate business proposal, it's easy to only focus on what you're going to do. But you need to specify how you plan to maintain it. Many professionals don't include an exit strategy or don't detail this strategy well enough.

As you would with any other part of your business plan, be specific about the vendors and property management strategies you’ll use. 

 

3. Your Financial Strategy Wasn’t Realistic

 If your numbers are too low, you might not have considered worst-case scenario figures, and if your numbers are too high, you could be overspending. But how do you avoid doing either of these? You must have a fundamental understanding of what projects like yours cost.

Not sure what figures seem realistic? Speak to a real estate broker for a second opinion. 

 

4. You Didn’t Validate Your Marketing Strategy

Don’t get lazy when you’re detailing your marketing strategy. Mention which marketing strategies you'll use and why. Investors will lose interest if they feel your marketing strategy is random. 

To prove the power of your marketing strategy, use case studies and statistics. 

 

5. Your Team Wasn’t Balanced

 To execute a real estate development project, your team must have expertise that balances each other. For example, you can’t have all team members be construction experts. Review the skills, weaknesses, and strengths of your team and ensure it’s coherent in your organizational structure.

 

 

5 Templates for Real Estate Business Plans

To help get you started, here are websites that offer templates for real estate business plans. It’s best to amend these templates based on the key components of a real estate business plan and your development project. Also, these templates don’t have exit strategies, so don’t forget to include them in your business proposal. 

 

1. GrowThink

This website provides investment and growth advisory services to all kinds of businesses. You can find any real estate business plan template here, from templates for investment to property management. This example of a real estate business plan is ideal for developers. 

 

2. Template.Net

As the name suggests, this website offers various ready-made templates. There is a real estate business plan sample for developers, agents, construction projects, and the list goes on. Here is a great real estate business proposal for developers.

 

3. UpMetrics

This example of a real estate business plan has a professional design, and the information is comprehensive. UpMetrics offers a wide array of templates, and you can subscribe to this website if you need business proposals often. 

 

4. Pro Business Plans

 Real estate developers will find more than just a basic business plan template on this site. Although you might not need all the sections in this business plan sample, it’s an excellent resource to get your strategic juices flowing. Pro Business Plans also offers pitch decks and business proposal samples for investors. 

 

5. Business in a Box

 Business in a Box offers a kit for real estate business proposals. This kit includes several documents to develop an end-to-end business plan. You can find many other templates too. Some of the templates are real estate architecture plans, construction plans, and project management plans. 

 

 

Bottom Line 

Whether you’ve been writing real estate business proposals for years or months, always keep your understanding updated. It’s common for many professionals to glance over or not provide enough information on key sections. The devil is in the details, and this goes unsaid for any real estate business plan you develop.

Valerie Mhere Community Manager

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